Prodromos v. Poulos

560 N.E.2d 942, 202 Ill. App. 3d 1024, 148 Ill. Dec. 345

• Court: Appellate Court of Illinois
• Decided: August 31, 1990
• Docket: 1-89-0977
• Status: Published

Opinions

JUSTICE RAKOWSKI

delivered the opinion of the court:

Plaintiff John Pródromos brought an action for specific performance of a real estate sales contract and damages against First National Bank of Skokie, as trustee, u/t/a dated October 1, 1974, a/k/a trust No. 50102T (Trustee Bank), and Jerry Poulos, the sole beneficiary of the trust. The first amended complaint requested relief on three alternate theories: (1) specific performance of the contract by the Trustee Bank; (2) specific performance by defendant Poulos; or (3) damages against Poulos for unjust enrichment. Defendants moved pursuant to sections 2—619(a)(7) and 2—619(a)(9) of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, pars. 2-619(a)(7), (a)(9)) to dismiss counts I and II on the grounds that Poulos did not have written authority to act as an agent of the Trustee Bank, that the Trustee Bank neither executed the contract nor ratified Poulos’ action, and that because Poulos signed the contract in a representative capacity he cannot be bound personally. The defendants moved to dismiss the third count on the grounds that the existence of an express contract precluded relief on a theory of unjust enrichment. The trial court granted the motion and dismissed all three counts with prejudice.

The issues presented on appeal are: (1) whether the action of the trustee in issuing three documents necessary to complete a real estate sales contract constitutes ratification of that contract even if the documents do not specifically refer to the contract; (2) whether the trust beneficiary who signed a contract as agent of the trustee but who was without authorization to do so can be personally compelled to perform; and (3) whether the complaint stated a cause of action in quasi contract. We affirm.

The parties agree on the following facts. In 1987, John Pródromos and Jerry Poulos owned adjoining parcels of real estate located in unincorporated Cook County, Illinois, outside of the Village of Glenview and the City of Prospect Heights. Legal title to the Poulos land was held by the Trustee Bank as trustee and Poulos was the sole beneficiary of the trust.

Under the terms of the trust, Poulos had power to direct the Trustee Bank to dispose of the property in various ways. However, Poulos could not act for the Trustee Bank:

“No beneficiary hereunder shall have any authority to contract for or in the name of the trustee or to bind the trustee personally.”

In 1987, Glenview sought to annex both properties. Pródromos asked Poulos to join with him in resisting the Glenview annexation in order to negotiate better terms or in annexing with Prospect Heights. Pródromos agreed to bear all expenses of these dealings which would enhance the value of both properties. In August 1987, Pródromos and Poulos agreed that, if Pródromos was successful in negotiating a favorable annexation, Poulos would agree to sell his property to Pródromos. Poulos would sell at a mutually agreed on price, and this agreement would be based in part on the annexation terms which Pródromos secured to enhance the value of the property.

After months of negotiations, Pródromos and Glenview reached a favorable annexation agreement enhancing the value of both properties. On January 5, 1988, Pródromos and Poulos met to complete the annexation agreement and to complete the documentation for the sale of Poulos’ property to Pródromos.

In paragraph No. 2, the sales contract states:

“First National Bank of Skokie, as Trustee under Trust 50102T under agreement dated October 1, 1974 by: Jerry Poulos (Seller) agrees to sell the real estate and the property described above, if any, at the price and terms set forth herein, and to convey or cause to be conveyed to Purchaser or nominee title thereto by a recordable trustee’s deed ***.”

Poulos signed the first page of the contract “Jerry Poulos, as agent for First National Bank of Skokie, T/U/T 50102T dated October 1, 1974.” The rider introduced both parties at the top, describing Poulos as an “agent” for the Trustee Bank. Poulos signed the rider twice as “Seller: Jerry Poulos.”

Subsequently, Poulos caused the Trustee Bank to issue: (1) a trustee’s deed conveying the property to the Bank of Ravenswood as trustee for trust No. 25 — 9017; (b) an ALTA statement; and (c) a proceeds letter addressed to the Bank of Ravenswood and designating Poulos and the Trustee Bank to be the recipients of monies and proceeds from the real estate transaction. However, these papers were not delivered to Pródromos.

Section 2—619 (Ill. Rev. Stat. 1989, ch. 110, par. 2—619) provides:

“(a) Defendant may, within the time for pleading, file a motion for dismissal of the action or for other appropriate relief upon any of the following grounds. If the grounds do not appear on the face of the pleading attacked the motion shall be supported by affidavit:

* * *

(7) That the claim asserted is unenforceable under the provisions of the Statute of Frauds.

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(9) That the claim asserted against defendant is barred by other affirmative matter avoiding the legal effect of or defeating the claim.”

The nonmoving party may then present affidavits or other affirmative matter to counter the affirmative defenses.

When deciding to grant a motion to dismiss based solely on the plaintiff’s pleadings, the trial court must “take all well-pled allegations of fact contained in the complaint, and in any attached exhibits incorporated into the complaint, as true and construe all reasonable inferences therefrom in the plaintiff’s favor.” (Paine/Wetzel Associates, Inc. v. Gitles (1988), 174 Ill. App. 3d 389, 391, 528 N.E.2d 358.) If the only issue before the court is whether the complaint states a cause of action, then the court must “sustain the complaint unless it clearly appears that no set of facts could be proved under the pleadings which would entitle the plaintiff to some type of relief.” Paine/ Wetzel, 174 Ill. App. 3d at 393.

In a motion brought under section 2—619 (Ill. Rev. Stat. 1989, ch. 110, par. 2—619), the court must also consider whether the defendant has brought forth facts which constitute an affirmative defense that could defeat the plaintiff’s cause of action.

I

Pródromos asserts that the actions of the Trustee Bank in issuing three documents needed to execute a real estate sale contract constitute ratification of that contract even though none of the documents refer to the contract specifically.

The Illinois Statute of Frauds (Ill. Rev. Stat. 1989, ch. 59, par. 2) provides:

“No action shall be brought to charge any person upon any contract for the sale of lands, *** unless such contract or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized in writing, signed by such party.”

Under the Statute of Frauds, a person cannot enforce a real estate contract unless: (1) there is a written memorandum or note on one or more documents; (2) the documents collectively contain a description of the property and the terms of sale, including price and manner of payment; and (3) the memorandum or note contains the signature of the party to be charged. Shugan v. Colonial View Manor (1982), 107 Ill. App. 3d 458, 464-65, 437 N.E.2d 731.

In this case, neither party disputes the existence of a written document with the property description and terms of sale and signature of defendant Poulos as “agent” for the Trastee Bank. In his defense, Poulos disputes only whether the contract was subsequently ratified by the party to be charged, that is by the Trustee Bank.

In a contract for the sale of land, an agent may sign the contract only if the authority to do so is in writing. (Cosmopolitan National Bank v. Kobialka (1980), 85 Ill. App. 3d 1, 3, 406 N.E.2d 150, citing Lipkin v. Koren (1946), 392 Ill. 400, 64 N.E.2d 890, and Leach v. Hazel (1947), 398 Ill. 33, 74 N.E.2d 797.) If the agent’s signature is unauthorized, however, the principal can ratify the agent’s action after the fact by acceding to the action in writing. (Kobialka, 85 Ill. App. 3d at 4.) When he ratifies, the principal makes the agent’s act obligatory upon himself and thus confirms what was originally an unauthorized act. Wing v. Lederer (1966), 77 Ill. App. 2d 413, 418, 222 N.E.2d 535.

“ ‘The general rale is that the act of ratification must be of the same nature as that which would be required for conferring the authority in the first instance.’ ” (Kobialka, 85 Ill. App. 3d at 4, quoting Bruns v. Huseman (1914), 266 Ill. 212, 215-16, 107 N.E. 462.) At the least, the document ratifying an action, must show that the principal fully understood that ratification included the contract at issue. (Bruns, 266 Ill. at 215-16.) Furthermore, when several writings are used to satisfy the Statute of Frauds in support of a contract, each writing “must refer expressly to the other writing, or the several writings must be so connected, either physically or otherwise, as to show by internal evidence that they relate to the same contract.” Mid-Town Petroleum, Inc. v. Dine (1979), 72 Ill. App. 3d 296, 303-04, 390 N.E.2d 428.

On appeal, Pródromos concedes that Poulos was not an authorized agent of the Trustee Bank, but claims that the bank ratified the action of Poulos. After Poulos signed the contract as an “agent” of the Trustee Bank, the bank nonetheless issued a trustee’s deed, ALTA statement, and proceeds letter all dealing with the property in question. Thus, Pródromos argues, the Trustee Bank ratified the action of Poulos by issuing documents needed to complete the sale.

Poulos argues that the documents do not contain sufficient information to tie them to the improperly signed contract. They refer to the real estate in question but not to a contract with Pródromos. The trustee’s deed does not mention either Prodomos or the contract, but instead names the Bank of Ravenswood as grantee. Similarly, the proceeds letter is addressed to Ravenswood and directs that bank to send proceeds to Poulos and the Trustee Bank. The ALTA statement does not refer to any of the parties. Overall, the effect of these documents is to convey the property to a different trust.

The cases cited above state that ratification must be of the nature that would justify authorization in the first place and show that the ratifying party fully understood what was being ratified. To effect ratification, the documents must refer expressly to the contract documents. Thus, at a minimum, the Trustee Bank would have to ratify in a writing or set of writings that contained some reference to the real estate transaction and with appropriate signatures. In this case, the writings referred to the transfer of the specific property at issue but did not mention the Prodromos-Poulos sales contract. There are no allegations in the complaint that the Trustee Bank signed the documents with full understanding that these papers were connected with the Prodromos-Poulos contract.

Pródromos argues that although this fact is not specifically pleaded, we should infer it from other facts which are. This we cannot do. An inference is a “truth or proposition drawn from another which is supposed or admitted to be true. A process of reasoning by which a fact or proposition sought to be established is deduced as a logical consequence from other facts, or a state of facts, already proved or admitted.” (Black’s Law Dictionary 917 (4th ed. 1957).) We cannot conclude that a Prodromos-Poulos sales contract, including its terms, is a logical consequence to be inferred from the three mentioned documents.

Furthermore, “[t]he signing of the undelivered deed, without *** showing that appellee fully understood what [it] was doing, cannot be held to be a ratification of the contract.” (Bruns, 266 Ill. at 216.) If facts exist to establish that the Trustee Bank fully understood that the documents it prepared were connected with the Prodromos-Poulos contract, these facts should have been pled.

For these reasons, we hold that the complaint did not allege a cause of action against the Trustee Bank.

II

Pródromos next contends that Poulos, who was sole beneficiary of the trust, can be compelled to perform on the land-sale contract even though he signed it as an “agent” of the Trustee Bank.

In Illinois, the beneficiary to a land trust may act in his own capacity and enter a contract for conveying trust property if he has the sole right to direct the trustee to convey title under the trust. (Seaberg v. American National Bank & Trust Co. (1976), 35 Ill. App. 3d 1065, 1069, 342 N.E.2d 751, citing Feinberg v. Great Atlantic & Pacific Tea Co. (1970), 131 Ill. App. 2d 1087, 1090-91, 266 N.E.2d 401; see also Paine/Wetzel, 174 Ill. App. 3d at 394.) Under these cases, however, “the decisive principle [is] as follows: The beneficiary of a conventional land trust, as used in Illinois, may under appropriate circumstances enter into a valid contract to convey title to the trust property. He may do so not as agent of the trustee but in his capacity of beneficiary ***.” Seaberg, 35 Ill. App. 3d at 1069, citing Feinberg, 131 Ill. App. 2d at 1087.

Prodromos cites Rizakos v. Kekos (1977), 56 Ill. App. 3d 404, 406-08, 371 N.E.2d 896, for the propositions that courts prefer contract enforcement rather than contract evasion and, therefore, will enforce a contract containing the language of conveyance and signed by the trust beneficiaries. In Rizakos, however, the buyer did not even know that a trust was involved and that the status of the signatories could become an issue. The court held that to deny specific enforcement of a contract under those circumstances “would not only allow the defendant-sellers to prejudice the plaintiff by permitting them to deny their true status as beneficiaries, but would also allow the defendants to have a unilateral option whereby they could choose to enforce or escape their obligation under this contract at their whim.” Rizakos, 56 Ill. App. 3d at 407.

Pródromos also attempts to distinguish Feinberg and Seaberg, contending that, unlike the plaintiff in Feinberg, he was not the wrongdoer who then tried to enforce the lease which he himself had signed improperly and, unlike the beneficiary in Seaberg, Poulos did not sign a lease solely as an agent. Instead, he signed the body of the contract as an agent and promised “to convey or cause to be conveyed” the property in question and then signed the contract rider twice in his individual capacity. Pródromos argues that his case fits the facts of Rizakos in that Poulos signed a contract to convey real estate and should not be able to evade the consequences of his action simply because he signed in the wrong capacity.

In this case, Poulos signed a contract and rider, both of which referred to him as the “agent” of the Trustee Bank. At the time, Pródromos knew that the trust existed and that Poulos was sole beneficiary. The facts fit the proposition of law stated in Feinberg and Seaberg, not the exception described in Rizakos.

Further, the Statute of Frauds applies in sales contracts even where the person seeking protection has contrived to defraud the plaintiff. The point is preventing greater evil.

“ ‘The moral wrong alone of refusing to be bound by an agreement because it fails to comply with the statute, does not suffice to estop a defendant from asserting the statute as a defense.’

If this were not the applied rule the effect would be to nullify the statute and open the door to frauds it is intended to prevent.” Davito v. Blakely (1968), 96 Ill. App. 2d 196, 201, 238 N.E.2d 410, quoting Loeb v. Gendel (1961), 23 Ill. 2d 502, 504, 179 N.E.2d 7.

Plaintiff also argues that if the contract is held to be unenforceable, he is without a remedy and the wrongdoer is allowed to escape. Because no attempt was made to plead other forms of action, such as breach of implied warranty of authority (Feinberg, 131 Ill. App. 2d at 1090) or fraud (Seaberg, 35 Ill. App. 3d at 1071), we will not speculate as to their viability.

For these reasons, we affirm the trial court’s decision on count II.

Ill

Pródromos argues in the alternative that he has a cause of action against Poulos for unjust enrichment even though the parties had an express, but unenforceable, contract.

As a rule, plaintiffs cannot pursue quasi-contractual claims where there is an express contract between the parties. (Industrial Lift Truck Service Corp. v. Mitsubishi International Corp. (1982), 104 Ill. App. 3d 357, 360, 432 N.E.2d 999.) This rule holds the contract parties to their agreement and prevents a party who made a bad business decision from asking the court to restore his expectations. Quasi-contract, thus, is available only in the absence of an express agreement and “is not a means for shifting a risk one has assumed under contract.” Industrial Lift, 104 Ill. App. 3d at 361.

Quasi-contract arises from the relations between the parties or from a voluntary act of one of them. (Board of Directors of Carriage Way Proyerty Owners Association v. Western National Bank (1985), 139 Ill. App. 3d 542, 547, 487 N.E.2d 974.) Action under this theory can occur “wherever one party has benefited from the services of another under circumstances in which, according to the dictates of equity and good conscience, he ought not to retain such benefit.” Carriage Way, 139 Ill. App. 3d at 548.

In some circumstances, the relationship between the parties allows relief even if an express agreement also existed. When, for example, an express contract to convey land is unenforceable because of the Statute of Frauds, courts of equity may “furnish a more complete and fuller justice than that afforded by an action at law” and order specific performance on the contract. (Tess v. Radley (1952), 412 Ill. 405, 410-11, 107 N.E.2d 677.) This remedy requires, however, that the contract be fully performed by one party and that “performance must be such that if the remedy is withheld it would be a fraud upon the promisee if the agreement were not carried out.” Tess, 412 Ill. at 411.

The facts here show that Pródromos did have a contract. The fact that the contract was unenforceable under the Statute of Frauds means only that Pródromos made a bad bargain. The court cannot interfere. The facts show further that Pródromos stood ready to perform, but not that he had paid for the land and then received nothing in return. Under Industrial Lift he cannot seek relief simply because he bargained for a contract which he could not enforce and this disappointed his expectations. Under Tess he cannot seek relief simply because he was ready to perform on the unenforceable contract.

For the reasons stated, the judgment of the trial court is affirmed.

Judgment affirmed.

McNAMARA, J., concurs.